Tax Preparer Programs

There has been a lot of activity lately relating to tax preparer registration, but first a little history. The IRS was growing increasingly concerned over incompetent and fraudulent tax preparers last decade so in 2009 they decided to roll out a tax preparer registration program. While the real issue was the volume of incorrect filings related to the earned income tax credit, the IRS decided that they would take a “comprehensive” approach and try to deal with all tax preparer issues in one single program. The Tax Preparer Registration Program was initiated in 2009 and the first PTIN’s were issued in 2010. In order to prepare a tax return submitted to the IRS you had to have a PTIN. For CPAs the program pretty much ended there because, due to the recognition of the competence and self-regulation of the CPA profession, CPAs were exempt from other aspects of the program such as passing a (very) basic exam and obtaining a minimum of continuing education each year.

Those parts of the program, however, were never fully rolled out. Fast forward to 2014 and the Courts ruled that the IRS had overstepped its authority (who thought the IRS was capable of such a thing) in requiring all tax preparers to pass an exam and take CPE. It is important to note that the Court did say that the IRS was within its authority to track tax preparers so the PTIN portion of the program was considered legal. The IRS did not like the Court ruling, but realized it would be highly unlikely it would get Congress to change the law to make its tax preparer program legal.

Instead the IRS has decided to roll-out a “voluntary” program. Participants in the voluntary program would have to pass a basic test and complete annual CPE, but they would not be covered by many of the rules covering CPAs and enrolled agents when it comes to providing tax advice. As such the AICPA thinks such a program would be very misleading to the public, but more importantly not deal with the issue that is at the core of why the IRS started down this path in the first place. A voluntary program is sure not to pick up any of the fraudulent tax preparers and it is very unlikely to address the incompetent ones either.

Instead of wasting resources on a voluntary program, the IRS should spend those resources on monitoring all tax preparers through the PTIN program and then finding and prosecuting the ones perpetrating frauds on the government. That would deal with the real issue that the IRS needs to solve and do it for a lot less cost. Isn’t that what government truly interested in reducing a budget deficit should be all about?